Item 1.01.
Entry into a Material Definitive Agreement.
Credit Agreement
On December 6, 2016, the registrant, PRA Health Sciences, Inc. (
Holdings
), and Pharmaceutical Research Associates, Inc. (the
Borrower
), a wholly owned subsidiary of Holdings, entered into a Credit Agreement (the
Credit Agreement
) among the Borrower, Holdings, each lender from time to time party thereto and Wells Fargo Bank, National Association, as administrative agent, collateral agent, letter of credit issuer and swingline lender (the
Agent
).
Pursuant to the Credit Agreement, the Borrower refinanced the credit agreement, dated as of September 23, 2013, among PRA Holdings, Inc., the Borrowers affiliates party thereto, the lenders from time to time party thereto and UBS AG, Stamford Branch, as agent. The new facility is comprised of (i) a $625 million term loan facility and (ii) a revolving credit facility in a maximum amount of up to $125 million, in each case with an ultimate maturity date of December 6, 2021.
Interest Rates
. The interest rate applicable to the term loans and revolving loans under the Credit Agreement is a rate equal to LIBOR or the adjusted base rate (
ABR
) rate, at the election of Holdings, plus a margin based on the ratio of total indebtedness to EBITDA (the
Leverage Ratio
) and ranges from 1.25% to 2.25%, in the case of LIBOR rate loans, and 0.25% to 1.25%, in the case of ABR rate loans.
Mandatory Prepayments
. The Credit Agreement requires the Borrower to pay, subject to certain exceptions, outstanding term loans with:
·
100% of the net cash proceeds of the incurrence or issuance of certain debt; and
·
100% of the net cash proceeds in excess of $5 million of certain non-ordinary course asset sales and casualty and condemnation events, subject to reinvestment rights and certain other exceptions.
Voluntary Prepayments
. The Borrower is permitted to voluntarily prepay any outstanding loans under the Credit Agreement at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans.
Amortization and Final Maturity
. The Credit Agreement requires the Borrower to repay 5% of the original aggregate principal amount of the term loans in year 1, 7.5% in each of years 2 and 3, 10% in year 4, 12.5% in year 5, with the balance due at maturity. These amortization payments will be made on a quarterly basis.
Certain Other Provisions
. The Credit Agreement contains certain covenants that, among other things (and subject to certain exceptions), restrict the ability of Holdings, the Borrower and their subsidiaries to:
·
create any liens;
·
make investments and acquisitions;
·
incur or guarantee additional indebtedness;
·
enter into mergers or consolidations and other fundamental changes;
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·
conduct sales and other dispositions of property or assets;
·
enter into sale-leaseback transactions or hedge agreements;
·
prepay subordinated debt;
·
pay dividends or make other payments in respect of capital stock;
·
change the line of business;
·
enter into transactions with affiliates;
·
enter into burdensome agreements with negative pledge clauses and clauses restriction; and
·
subsidiary distributions.
In addition, the Credit Agreement contains financial covenants that will require Holdings to maintain a Leverage Ratio below a specified level (which may be temporarily increased following a material acquisition) and an interest coverage ratio above a specified level as of the last day of any four fiscal quarter period.
In addition to the foregoing negative covenants, the Credit Agreement also contains certain customary representations and warranties and affirmative covenants and customary events of default (including upon a change of control), which would permit the Agent, with the consent of the required lenders, to accelerate all amounts outstanding under the Credit Agreement following such events of default.
Guarantee
On December 6, 2016, Holdings, the Borrower and certain subsidiaries of Holdings (the
Subsidiary Guarantors
and, together with Holdings and the Borrower, the
Guarantors
) entered into a Guarantee (the
Guarantee
) in favor of the Agent. The Subsidiary Guarantors include each material, wholly owned U.S. restricted subsidiary of Holdings with customary exceptions, including where providing such guarantees is not permitted by law, regulation or contract or would result in material adverse tax consequences. Pursuant to the Guarantee, the Guarantors unconditionally guarantee the obligations under the Credit Agreement.
Security Agreement
On December 6, 2016, in connection with the Credit Agreement, each Guarantor entered into a Security Agreement (the
Security Agreement
) with the Agent pursuant to which all obligations of the Borrower under the Credit Agreement, and the guarantees of such obligations pursuant to the Guarantee, are secured, subject to permitted liens and other exceptions, by substantially all of the assets of the Borrower and each Guarantor, including but not limited to: (i) a perfected pledge of all of the capital stock issued by the Borrower and each Guarantor and (ii) perfected security interests in substantially all other tangible and intangible assets of the Borrower and the Guarantors (subject to certain exceptions and exclusions).
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